New Sony CEO to Keep Charge of Troubled TV Operations

Sony Corp's incoming CEO Kazuo Hirai speaks during a roundtable discussion with journalists at the company's headquarters in Tokyo in this February 9, 2012 file photo. The biggest challenge facing Sony's incoming chief executive Kazuo Hirai will be how to bridge a divide in his consumer electronics company between the 'fundamentalists", engineers who want to return the company to its orginal ethos of making cool gadgets, and "new-agers" who see the future in content and connectivity. To match Special Report SONY
Reuters

(Reuters) - Sony Corp CEO Kazuo Hirai signaled his determination to turn around the group's ailing TV business by keeping direct charge of the division, as the Japanese brand fights to regain ground against rivals such as Apple.

Hirai, who formally takes over as chief executive from Howard Stringer next week, inherits a company that - like much of corporate Japan - has been outgunned in recent years by rivals like Apple and Samsung Electronics.

The maker of Bravia televisions and Vaio laptops expects a 220 billion yen ($2.7 billion) net loss for the year to this month, a fourth straight year of losses, and due in large part to a TV business that has not been able to keep up with nimbler and cheaper rivals.

Sony said Hirai would head a new home entertainment division, which includes TVs and replaces the consumer products and services group that he had led.

The TV business is Sony's main business and (its recovery) is an absolute condition that must be met for the firm to recover its performance, said Keita Wakabayashi, an analyst at Mito Securities. That's why it will be placed directly under (Hirai's) control, and means he has to take care of the most important issue.

Sony hopes Hirai, credited with reviving the PlayStation game business through aggressive cost-cutting, can work similar magic with a TV business that has lost more than $11 billion over eight financial years.

Sony will also form a new unit to oversee its medical business, which it has described as a growth area.

The market is big ... but industrial electronics makers like Hitachi and Toshiba are already in this area so it's not like Sony is advancing into a free territory, said Mito's Wakabayashi. Compared to this, it's much more important to improve the TV business.

CORPORATE PLIGHT

In many ways, Sony's woes illustrate the plight of a once-mighty corporate Japan hobbled by the very system that made it the world's envy back in its 1980s heyday.

Japan's manufacturers have invested hugely in factories and equipment to carry out their traditional strength of in-house production, but are now grappling with plunging product prices and excess capacity in a rapidly shifting digital landscape.

TV makers Sony, Panasonic and Sharp expect to lose a combined $17 billion this year alone, also clobbered by a strong yen, weak demand and tough competition from the likes of Samsung Electronics.

Long Sony's biggest product category by sales, TVs were overtaken by other segments in October-December. TVs accounted for 13 percent of overall sales in the quarter, down from 19 percent a year earlier and trailing games (16 percent) and combined sales from Sony Pictures and Sony Music (15 percent), according to the company's latest financial statement.

Despite the Walkman creator's image as an electronics icon, its only profitable businesses this financial year have been in entertainment - Sony Pictures and Sony Music - and financial services.

Sony has been scrapping production capacity for several months, moving closer to Apple's asset-light business model of keeping design and product development in-house and outsourcing manufacturing.

It said last week it was selling part of a chemical products subsidiary, while in December it agreed to sell its near-50 percent share in a liquid crystal display venture with Samsung Electronics to the South Korean company.

In 2000, Sony's market value was seven times that of Apple. Today, Apple's $555 billion market value dwarfs Sony's $20 billion, which is also just a ninth of Samsung's $180 billion.

Hirai's promotion has boosted Sony's stock price, however, jumping around 27 percent since he was unveiled as the next CEO on February 1, outpacing a 16 percent rise on the benchmark Nikkei over the same period.

Sony shares closed up 3.1 percent at 1,742 yen on Tuesday ahead of the announcement.